The argument: Conventional progressive critiques of the near-mythical importance of the Bretton Woods Institutions require amendment in South Africa, where the World Bank barely established a loan portfolio during the ANC’s first term; instead, the damage done was in the ideological and policy spheres, where Bank staff were prolific in their support for essentially status quo arrangements even where clear, redis- tributive alternatives had been mandated by the Democratic Movement.
THE POWER OF GLOBAL NEOLIBERALISM
The contradictions between expectations and reality, in relation to democratic South Africa’s relations with the World Bank, were unveiled in this 1992 Business Dayreport:
A questioner from the floor of the World Bank’s final function at the annual meetings asked Bank president Lewis Preston whether this year’s meetings had been any different because of the absence of socialists following the collapse of the command economies.
‘There are still some socialists here,’ Preston replied. ‘There are still even some communists around. But they are talking in very low voices, and they are mostly South Africans.’1
Offhand wit aside, the reason Lewis Preston – and four years later Michel Camdessus, and in between a stream of World Bank staff –
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identified a threat from the South African Left was because progressive forces managed, as few others around the world did, to keep the two major international neoliberal institutions at arm’s length with respect, at least, to lending. The history of the Bank and the International Monetary Fund in South and Southern Africa was embarrassing, to put it mildly, and it was not particularly difficult for labour and social movements openly to criticise the Bank and IMF at the same time a half dozen or so ANC leaders sought cosiness. That those leaders (e.g. Thabo Mbeki, Trevor Manuel and Alec Erwin) turned occasionally to a kind of leftist rhetoric in defending their
‘engagements’ with the Bank, as we see below, should not confuse matters (presumably theirpurpose).
Where the progressive social forces were not as careful – in permitting World Bank advisory teams to make a huge impact on social and economic policy, and in international trade relationships (as shown in Chapter 1) – the combined logic of neoliberalism and uneven development had a devastating effect. This chapter documents the damage done by the IMF (through policy advice and in informal conditionality on a December 1993 loan) and by the Bank’s advisory role in several key areas of social policy. Nevertheless, building on some degree of local resistance to the Bank, the next chapter discusses the strategic orientation of principled opposition to global neoliber- alism during a late 1990s context of widespread delegitimisation of what came to be termed the ‘Washington Consensus’, reflecting just how much rigidly homogeneous power emanated from a few institutions and ideologues in the US capital city.
(The Washington Consensus refers to the 1980s–1990s ideology of the World Bank, International Monetary Fund, US Treasury Department, Federal Reserve Board and assorted Washington think- tanks funded by large corporations and banks, as well as institutions outside Washington like the World Trade Organisation and sundry conservative university economics departments modelled on the Chicago School.)
In short, there are slim but important roots of resistance in South Africa that may help a new internationalism to prosper. Those roots were seeded not only during the heroic solidarity struggles of the anti- apartheid era, but during the 1990s when the World Bank, IMF and their allies claimed, with the utmost conviction and self-confidence,
‘There Is No Alternative’ – TINA (the slogan made famous by Margaret Thatcher) – to neoliberal globalisation. South African
activists, especially in the Campaign Against Neoliberalism, soon understood the implications of TINA, and learned a rejoinder: ‘There Must Be an Alternative’ – THEMBA, the Zulu word for ‘hope’.
A LEGACY OF FINANCIAL INDISCRETION
There are numerous examples of the Bretton Woods Institutions’
historical support for oppressive systems in the Southern African subcontinent. By the 1950s, the Bank had become the largest foreign financier to several regional colonies then still under minority rule.
The Bank provided loans to the then ‘Rhodesias and Nyasaland’, to South Africa, and to Portuguese-ruled Angola and Mozambique to build white-controlled infrastructures for the benefit of white economic interests and relatively rich white consumers.
The then largest Bank project was the huge Kariba hydroelectric dam on the Zambezi River, between what are now Zambia and Zimbabwe. The dam summarily displaced tens of thousands of Batonga people from their ancestral lands and livelihoods without compensation (leading to many deaths due to degraded resettlement conditions), primarily to serve South African, British and US multi- national copper-mining corporations’ interests. The Bank did not direct its ‘development’ programmes to the needs of indigenous majority populations – except by attempting in then-Southern Rhodesia to promote – through a loan aimed at implementing the hated Native Land Husbandry Act – alien individual-ownership title systems on African communal lands (thus generating sufficient peasant protest to halt the process).
Despite a belated formal endorsement of the need for democracy and development, the IMF and Bank continued to collude with oppressive regimes – black neocolonial as well as white racist – in conformity with the Cold War geopolitical designs of their chief sponsors (as well as their own institutional financial interests). Despite blatant corruption and human rights abuses, Mobuto’s notorious dictatorial regime in Zaire continued for decades to receive IMF and Bank funding. Even during the late 1980s, when foreign donors finally imposed financial sanctions against the authoritarian regime of Hastings Banda in Malawi, the Bank, none the less, approved loans to his widely discredited government.
As Southern African nations struggled to undo the negative political, social and economic effects of long years of colonial domination and exploitation, they found themselves saddled with
‘odious debts’ (as international legal doctrine terms illegitimate loans) built up by previous oppressors. For example, while conducting a war against Zimbabwean liberation forces, the illegal UDI Rhodesian regime of Ian Smith defaulted on its World Bank loan repayments.
Yet, at the end of that war, the government and people of newly independent Zimbabwe were obliged to repay the Rhodesian debt.
Such debts should have been annulled with the elimination of the illegitimate regimes that had created them.
As the Third World debt crisis mounted in the early 1980s, the Bank and IMF stepped in to ‘manage’ the external debts – and government policies – of countries in Southern Africa, as they did elsewhere in the world. However, this did not solve – but instead deepened – the debt. The Bank and the IMF continued to squeeze whatever they could from our countries. Even Mozambique, plunged into deep economic crisis by a decade of devastating war sponsored by apartheid South Africa, faced an official debt service obligation to its international creditors of more than 93 per cent of its export earnings in 1991 (though it typically paid around a fifth, which was still more than the health and education budgets combined).
Utilising such indebtedness as a weapon, the IMF, the Bank and other Northern creditors compelled country after country in Southern Africa to implement structural adjustment programmes under their aegis. Others which did not agree to structural adjustment (war-torn Angola, relatively prosperous Botswana, and South Africa) still had to give the IMF ‘policy undertakings’ – under the threat of losing inter- national ‘creditworthiness’ without the IMF’s stamp of approval.
In South Africa, the World Bank’s history was just as questionable, in light of its mandate to promote development projects that reduced poverty. Its role began just two years after apartheid was formally introduced in 1948, and its first loans – $30 million to Eskom and
$20 million for South African railways/harbours – were granted in 1951 and repaid at the end of 1953. Follow-up loans of $162 million for both projects continued through 1968. Indeed, even in the wake of the 1960 Sharpeville massacre, the Bank granted loans worth $45 million, including $20 million in 1966 (even after then ANC president Albert Luthuli and Rev. Martin Luther King, Jr. had already called for financial sanctions against Pretoria). There was no direct benefit
for black consumers, who because of apartheid were denied Eskom power financed by the Bank and whose rail transport prospects were mainly linked to their employment – if they possessed a pass book – in urban centres. The Bank discontinued lending to South Africa when the last Eskom loan (for a coal-fired power station) was repaid, because per capita GDP rose to levels that disqualified access by Pretoria.2
However, the Bank still contributed to apartheid coffers, via the $8 billion first phase of the Lesotho Highlands Water Project, which dammed rivers and tunnelled through mountains to supply a voraciously thirsty Johannesburg – mainly white households, white- owned farms and white-owned mines – with water notwithstanding huge social and environmental costs. In October 1986, following a coup in which Prime Minister Leabua Jonathan was ousted with Pretoria’s support, and at a time of harsh repression in South Africa after the foreign debt repayment ‘standstill’ of September 1985, there was little chance of South Africa getting access to fresh foreign funds.
The Bank chose that moment to begin the project, and lent Lesotho – with its $600 per capita income, and reliance upon foreign aid for 20 per cent of its GDP – $110 million, solely because of South Africa’s ability to stand surety (indeed, the only financial risk analysis in the Bank’s initial report concerned whether Pretoria would default).3
The IMF, meanwhile, had snubbed international condemnations of apartheid and the financial sanctions campaign during the late 1970s and early 1980s, in the wake of the Soweto uprising, in order to channel $2 billion to Pretoria for vitally needed balance of payments support. The IMF credits raised all manner of social and economic con- troversies, including mainstream criticism of South Africa’s unrestrained government budget (especially for defence), of the Reserve Bank’s inadequate monetary control, and of economic distortions and artificial barriers created by apartheid. Loans were pushed through anyway. Only in 1983, after it was forbidden to continue bailing out the South African regime – through pressure by social movements exerted upon the US Congress – did the IMF change its policy.
The IMF ceased lending, but during the 1980s sent in advisory teams each year to help the apartheid government switch to neoliberal economic policies. In 1991, IMF experts designed the regressive Value Added Tax, which led to a two-day strike by 3.5 million workers in November that year. In 1992, the IMF took another swipe at South African blacks with its pronouncement that ‘real wage growth must
be contained’.4Given this sort of history, the IMF had no real prospect of winning hearts and minds. And the Bank was forced to bend over twice as far as anywhere else in the world to even have a fighting chance against South Africa’s mass movements.
CONTEMPORARY WORLD BANK WOES
In May 1990, when the World Bank made its first substantial appearance in South Africa in more than two decades, a war of position began that finally resulted, nearly seven years later, in a minor face-saving victory for the Bank’s Johannesburg staff. The first World Bank loan to democratic South Africa – worth R340 million – was only granted in 1997, for the supposed purpose of making small and medium enterprises more globally competitive. The Bank had tiptoed into South Africa’s development maelstrom with exceptional sensitivity. For on the one side it faced a strong left rump of the Democratic Movement (as well as other radical forces), well aware of the Bank’s reputation as the most powerful oppressive force in the Third World since the days of colonialism. Many within the ANC who had lived in Tanzania, Zambia, Uganda and elsewhere on the African continent shared a gut feeling that a democratic South Africa must avoid the World Bank like the plague.
On the other side – inviting the Bank and International Monetary Fund (IMF) with indecent haste – were powerful bourgeois forces.
Business ideologues and civil servant scoundrels of the late apartheid era, including leading strategists of the Development Bank of Southern Africa (DBSA), were ever more anxious to show that Pretoria’s control of bantustans was dependent not merely upon securocrat muscle power, but also upon homeland ‘structural adjustment programmes’
(the DBSA did, clumsily, actually use that name). Such econocrats were drawn from both old guard government and big business cliques, and harboured firm ambitions not only of surviving the transition process but indeed of actually thriving in whatever environment lay ahead. At the vanguard was the Urban Foundation, which tried to position itself as the favoured World Bank junior partner (ahead of its rivals the DBSA and Independent Development Trust). Using increasingly strident but nevertheless quite effective policy advocacy, the UF invariably cited free-market conventional wisdom from
Washington DC as the gospel. As Chapters 3 and 4 show, the UF’s vision of cities was decisive.
But as an unintended consequence, the econocrats’ arrogance gave many Bank opponents in South Africa experience in understanding the logic and codewords of neoliberalism, critiquing these based on their emergence in the late apartheid state’s development practice, and also gradually coming to know Bank personnel. For example, during that first Bank visit in 1990, several key ANC leaders were visited by Geoffrey Lamb, a former SACP intellectual who had spent time in jail during the 1960s before escaping to East Africa and then to England. There he had completed his doctorate and acted as supervisor to South Africa’s emerging cadre of Marxist sociologists, prior to migrating to Washington where during the 1980s he focused on the crafty goal of making neoliberal African economic policies appear to be ‘homegrown’:
Building an independent technocratic policy capacity within member countries is therefore important to encourage domestic political accountability for policy decisions over the longer run and for improving the credibility of economic advice to countries’
political leaderships – provided that support for technocratic ‘policy elites’ does not too drastically compromise the recipients’ influence.5 Indeed, being too close to the Bank was a danger that would emerge later. But in the early days, Lamb broke the ice effectively with his old friend from Sussex, Thabo Mbeki (also a tough young Communist Party ideologue during the 1960s). The two proceeded to assign specialist teams to analyse conditions and generate policy options in macroeconomics, industry, health, education, housing and land reform. The Bank agreed, apparently reluctantly, that there would be no loans to the De Klerk government, which it too came to label
‘illegitimate’.
Lamb’s colleague Jeff Racki – scion of a wealthy liberal family from Cape Town, who was responsible for extremely low-quality urban programmes in neighbouring Zimbabwe – received formal endorsements for research, along with chaperons (drawn even from the SACP) for several ‘urban missions’. The Bank also funded handsome consultancies to bring aboard a few influential left-leaning intellectuals and researchers who had previously devoted nearly all
their energies to the Democratic Movement, including the trade union movement.
Yet notwithstanding a well-lubricated entry to South Africa, the early 1990s were also extremely difficult years for the Bank and IMF, in part because their international reputation was plummeting to unprecedented depths. Bank ideology had, under the influence of the 1980s Reagan Administration, DC, gone over the top towards neolib- eralism. By 1990, Bank economist Manuel Hinds, for example, felt comfortable openly arguing that
the overall model chosen to integrate the economy into the inter- national markets ... should aim at avoiding the appropriation of rents by suppliers of nontradables and workers. That is, they should maintain the real wage low, so that excess profits accrue to capital ... In carrying out all these activities, a close alliance between Government and private agents must be developed.6
Such vulgar propaganda for big business was apparently the norm for Bank staff at the height of the Washington Consensus era. Scandal emerged, however, when the Bank’s chief economist, Lawrence Summers (who in 1999 was named US Treasury Secretary), wrote some infamous lines in a December 1991 internal memo (leaked to The Economistmagazine): ‘I think the economic logic of dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that ... Underpopulated countries in Africa are vastly under polluted.’7Apologies and retractions followed, but the Bank again made unwanted headlines in 1992 when senior staff suppressed a United Nations report critical of their role in the disastrous Sardar Sarovar dam in India. Shortly thereafter, Summers’ predecessor, South African-raised Stanley Fischer (later the deputy managing director of the IMF), conceded to the Financial Timesthat the Bank/IMF
‘culture of secrecy’ had been characterised by ‘few checks and balances’. Next came the October 1992 ‘Wapenhans Task Force’
internal Bank report on portfolio performance, which concluded that 37 per cent of Bank projects were completed ‘unsatisfactorily’ in 1991, and more than 40 per cent of Water Supply and Sanitation projects (especially in Africa) had ‘major problems’. Wapenhans also conceded a variety of valid borrower complaints (mainly from Third World Finance Ministries):
• ‘Bank staff know what they want from the outset and aren’t interested in hearing what the country has to say.’
• ‘After all the documents are signed, the Bank can change philosophy again.’
• ‘The Bank overpowers borrowers, and the country negotiating team often doesn’t have the strength to resist.’
• ‘The staff rigidly insists on as many conditions as possible, some of which reflect insensitivity about the political realities in the borrower country.’
Indeed, in a 1993 speech, Bank Africa chief Kim Jaycox admitted that
‘The donors and African governments together have, in effect, undermined capacity building in Africa. They are undermining it faster than they are building it, or at least as fast.’8Jaycox had made much the same concession in private discussions with his opponents in Johannesburg the previous year. To stay in business, the Bank was apparently learning how to concede pastmistakes, and claimed to be
‘learning by doing’.
Sensing that their critiques were hitting home, the world’s more advanced social and environmental advocacy movements began to have a field day. A ‘50 Years is Enough!’ campaign of NGOs gathered momentum following protests at Bank–IMF Annual Meetings during the late 1980s and early 1990s in Washington DC, Berlin, Bangkok and Madrid. There was a growing move within the campaign to stop transcend the objective of reforming the Bank, as a limited degree of success had been achieved, after years of Bank-bashing, around gender awareness, environmental considerations, community participation and transparency (though enormous damage to women, ecology and communities continued through Bank structural adjustment policies, especially budget cuts). Instead, using the divestment tactic learned in the anti-apartheid movement, groups associated with the Ralph Nader Washington DC networks and with Global Exchange proposed defunding and boycotting the Bank and IMF.9
At the same time, a right-wing populist resurgence in the United States was adding to the Bank’s sense of fragility, particularly because future ‘recapitalisation’ (new infusions of funding) came to depend upon the approval of the proto-fascist senator Jesse Helms (chair of the Foreign Relations Committee after the 1994 Republican con- gressional victory). Helms and his allies considered the Bank to be a statist if not socialist one-worlder agency intent upon throwing his